BILL ANALYSIS AB 1602 Page 1 Date of Hearing: April 20, 2010 ASSEMBLY COMMITTEE ON HEALTH William W. Monning, Chair AB 1602 (John A. Perez) - As Amended: April 15, 2010 SUBJECT : Health care coverage. SUMMARY : Enacts the California Patient Protection and Affordable Care Act to implement reforms under the federal Patient Protection and Affordable Care Act (Affordable Care Act) in California. As such, prohibits group or individual health care service plans or health insurers (collectively carriers) from establishing lifetime or unreasonable annual limits on the dollar value of benefits. Requires carriers to provide minimum coverage for specified preventive services. Prohibits carriers from imposing preexisting condition exclusions for enrollees or insureds under 19 years of age. Prohibits the limiting age for dependent health care coverage to be less than 26 years of age. Creates the California Health Benefit Exchange (Exchange) for the purchase of health care coverage. Specifically, this bill : Lifetime Limits 1)Prohibits carriers, effective September 23, 2010, from establishing lifetime limits on the dollar value of benefits for any participant or beneficiary. With respect to plan years prior to January 1, 2014, permits a group or individual health care service plan contract, after September 23, 2010, to only establish a restricted annual limit for the scope of benefits that are "essential health benefits" under the Affordable Care Act, with prior approval from by United States Secretary of Health and Human Services (DHHS). Minimum Coverage for Preventive Services 2)Requires carriers, effective September 23, 2010 and subject to the minimum interval established by DHHS Secretary pursuant to the federal Affordable Care Act, to provide coverage, without any cost sharing requirements, for: a) Immunizations that have in effect a recommendation from the Advisory Committee on Immunization Practices of the federal Centers for Disease Control and Prevention. b) Evidence-informed preventive care and screenings for AB 1602 Page 2 infants, children, adolescents, and women provided for in the comprehensive guidelines supported by the federal Health Resources and Services Administration and other services that meet federal standards, as specified. 3)Prohibits anything in this bill from being construed to prohibit a plan from providing coverage for services in addition to those recommended by the United States Preventive Services Task Force or to deny coverage for services that are not recommended. Prohibition against Pre-existing Conditions 4)Prohibits health plans, effective September 23, 2010, from imposing any preexisting condition exclusion with respect to coverage under the plan of any enrollee under 19 years of age. 5)Exempts health plan contracts or health insurance policies that are not required to provide essential health benefits, as defined, from this provision. Dependent Coverage 6)Prohibits the limiting age for dependent health care coverage to be less than 26 years of age, except as specified. 7)Prohibits the limiting age provision from requiring specified public employers to pay the cost of coverage for dependents who between 23 and 26 years of age. Permits employees of those entities to elect to provide coverage to dependents between 23 and 26 years of age, provided they contribute the premium for that coverage. 8)Requires employment contracts subject to collective bargaining that are issued, amended, or renewed on or after September 23, 2010 to be subject to the limiting age provisions. Exempts employment contracts subject to collective bargaining that are effective prior to September 23, 2010 from this provision. The Exchange 9)Creates the Exchange, governed by an executive board consisting of an unspecified number of members, to be appointed by the Governor, the Senate Committee on Rules, and AB 1602 Page 3 the Speaker of the Assembly. Requires the board to be responsible for using the funds awarded by DHHS for the planning and establishment of the Exchange. 10)Requires the board to, at a minimum: a) Implement procedures for the certification, recertification, and decertification, consistent with guidelines established by DHHS, of health plans as qualified health plans; b) Provide for the operation of a toll-free telephone hotline to respond to requests for assistance; c) Maintain an Internet Web site through which enrollees and prospective enrollees of qualified health plans may obtain standardized comparative information on such plans; d) Assign a rating to each qualified health plan offered through the Exchange in accordance with the criteria developed by the Secretary; e) Utilize a standardized format for presenting health benefits plan options in the Exchange, including the use of the uniform outline of coverage established under the federal Patient Protection and Affordable Care Act ; f) Inform individuals of eligibility requirements for the Medi-Cal Program, the Healthy Families Program, or any applicable state or local public program, and if through screening of the application, the Exchange determines that such individuals are eligible for any such program, enroll such individuals in such program; g) Establish and make available by electronic means a calculator to determine the actual cost of coverage after the application of any premium tax credit and any cost sharing reduction, as specified; AB 1602 Page 4 h) Grant a certification attesting that, for purposes of the individual responsibility penalty under existing federal law, an individual is exempt from the individual requirement or from the penalty imposed because: i) There is no affordable qualified health plan available through the Exchange, or the individual's employer, covering the individual; or ii) The individual meets the requirements for any other such exemption from the individual responsibility requirement or penalty; i) Transfer specified information to the Secretary of the Treasury; and j) Provide to each employer the name of each employee who ceases coverage under a qualified health plan during a plan year (and the effective date of such cessation). 11)Permits the board, consistent with the standards, regulations, and rules promulgated by DHHS, to: a) Determine eligibility, enrollment, and disenrollment criteria and processes for enrollees and potential enrollees in the Exchange; b) Determine participation requirements, standards, and selection criteria for qualified health plans, including reasonable limits on a plan's administrative costs; c) Determine when an enrollee's coverage commences and the extent and scope of coverage; d) Determine premium schedules, collect the premiums, and administer subsidies to eligible enrollees and rates paid to participating plans; e) Determine rates paid to qualified health plans; f) Provide for the processing of applications and the enrollment and disenrollment of enrollees; g) Determine and approve the cost-sharing provisions for qualified health plans; h) Conduct various administrative functions; i) Maintain enrollment and expenditures to ensure that expenditures do not exceed the amount of revenues in the fund, and if sufficient revenue is not available to pay estimated expenditures, institute appropriate measures to ensure fiscal solvency; and, j) Share information with the Employment Development Department for the purpose of the administration and enforcement of the Exchange. 12)Requires the Exchange to facilitate the purchase of qualified AB 1602 Page 5 health plans to qualified individuals and qualified employers by January 1, 2014. California Health Trust Fund 13)Creates the California Health Trust Fund (Fund) in the State Treasury for the purpose of this bill. Requires all moneys in the Fund to be continuously appropriated without regard to fiscal year and permits any unexpended or unencumbered moneys in the Fund to be carried forward. 14)Requires the board to establish and maintain a prudent reserve in the Fund. FISCAL EFFECT : This bill has not been analyzed by a fiscal committee. AB 1602 Page 6 COMMENTS : 1)PURPOSE OF THIS BILL . According to the author, given the recent passage of the Affordable Care Act, California must begin the important task of implementing federal law. Several of the federal health reform provisions take effect this year, including the change in the limiting age, the ban on lifetime limits, and the end of pre-existing condition exclusions for children. This bill is a necessary first step towards enacting these important insurance market reforms. Additionally, federal health reform tasks the states with establishing the new, organized marketplaces where individuals and small businesses can more readily identify and compare coverage choices; purchase value based coverage, and access premium credits and cost sharing subsidies. This bill establishes the California Health Benefit Exchange to enact these key changes, and sets in motion the necessary duties to ensure California can quickly use the federal planning dollars and commence operations by January 1, 2014. 2)FEDERAL HEALTH CARE REFORM . On March 23, 2010, President Obama signed the Affordable Care Act; P. L. 111-148, as amended by the Health Care and Education Reconciliation Act of 2010; P. L. 111-152. Among other provisions, the new law makes statutory changes affecting the regulation of and payment for certain types of private health insurance. There are a number of health insurance provisions that will take effect in 2010, including those related to this bill: Young Adults on Parents' Health Plans. Young adults may stay on their parents' health plans to age 26, effective September 2010. The provision applies to all health plans, and does not exclude young adults who are married. Prohibition on Preexisting Condition Exclusions for Children. Insurers are prohibited from excluding coverage of preexisting conditions for children in the individual market, effective six months after enactment. According to a March 28, 2010 New York Times news article, just days after the President signed the Affordable Care Act, there was a dispute over the language in the law regarding the pre-existing conditions coverage provisions. The New York Times article stated that while insurers agreed that health insurance carriers offering individual or group coverage were unable to impose preexisting condition exclusions beginning in September, insurers AB 1602 Page 7 initially disagreed that the law required them to write insurance at all for the child or family, providing what they call in the insurance world "guaranteed issue" until 2014. The Secretary of DHHS issued clarification in a letter to the president of America's Health Insurance Plans (AHIP) stating that, "To ensure that there is no ambiguity on this point, I am preparing to issue regulations in weeks ahead ensuring that the preexisting condition exclusion applies to both a child's access to a plan and his or her benefits once he or she is in the plan." The Secretary further noted that regulations would make clear that by September, "children with pre-existing conditions may not be denied access to their parents' health insurance plans." In response, AHIP's president wrote to the Secretary that AHIP would accept the clarification of the new law and, fully comply with it. Prohibitions Against Lifetime Benefit Caps. Group health plans or insurance companies providing group or individual market coverage are prohibited from setting lifetime limits on the dollar value of benefits and from setting unreasonable annual limits on the dollar value of benefits, effective six months after enactment. Annual limits will be banned completely in 2014. 3)STATE INSURANCE EXCHANGES . Each state is required to establish an American Health Benefit Exchange and a Small Business Health Options Program Exchange by 2014 for individuals and small employers with 50 to 100 employees; after 2017, states have the option of opening the small business exchange to employers with more than 100 employees. States can opt to provide a single exchange for individuals and small employers. Groups of states can form regional exchanges or states can form more than one in-state exchange, but the exchanges must serve a geographically distinct area. While the individual and small-group markets will not be replaced by the exchanges, the same market rules will apply inside and outside the exchanges. Premium subsidies can be used only for plans purchased through the exchanges. If DHHS determines in 2013 that a state will not have an exchange operational by 2014, DHHS is required to establish and operate an exchange in the state. In 2017, states will have the opportunity to opt out of the federal requirements to establish insurance exchanges through a five-year waiver, if they are able to demonstrate that they can offer all residents coverage at least as AB 1602 Page 8 comprehensive and affordable as that required by this bill. Federal responsibilities. DHHS' responsibilities with respect to the exchanges include: establishing certification criteria for "qualified health plans" that will be sold through the exchanges; requiring such plans to provide the essential benefits package; requiring that the licensed insurance carriers issuing plans offer at least one qualified health plan at the silver and gold levels and meet marketing requirements; ensuring a sufficient choice of providers; and, ensuring that essential community providers are included in networks, are accredited on quality, implement a quality improvement strategy, use a uniform enrollment form, present plan information in a standard format, and provide data on quality measures. In addition, the Secretary will develop a rating system for qualified health plans and a model template for an exchange's Internet portal, and determine an initial and open enrollment period as well as special enrollment periods for people under varying circumstances. The Secretary is also required to establish procedures under which states may allow agents or brokers to enroll individuals in qualified health plans and assist them in applying for subsidies. Such procedures may include the establishment of rate schedules for broker commissions paid by health plans offered through the exchange. State responsibilities. The state exchanges will be required to certify qualified health plans, operate a toll-free hotline and Web site, rate qualified health plans, present plan options in a standard format, inform individuals of the eligibility requirements for Medicaid and the Children's Health Insurance Program, provide an electronic calculator to calculate plan costs, and grant certifications of exemption from the individual requirement to have health insurance. Exchanges will be required to be self-sustaining by 2015 and will be allowed to charge assessments or user fees to participating health insurance issuers or otherwise generate funding to support their operations. The exchanges also will award grants to "navigators" who will educate the public about qualified health plans, distribute information on enrollment and subsidies, facilitate enrollment, and provide referrals on grievances. Navigators may include trade and professional organizations, farming and commercial fishing organizations, community and consumer-focused nonprofit groups, chambers of commerce, unions, or licensed insurance agents or brokers. AB 1602 Page 9 Qualified employers purchasing through the exchange. Employers that are qualified to offer coverage to their employees through the exchange may provide premium support for a level of coverage (bronze, silver, gold, platinum) and employees may choose a plan within the designated level. 4)RELATED LEGISLATION . There are a number of bills related to the implementation of federal health care reform in California: AB 1595 (Jones) commencing January 1, 2014, to the extent required by the Affordable Care Act, requires persons who meets all other applicable eligibility requirements to be eligible for benefits under the Medi-Cal program if his or her income does not exceed 133% of the federal poverty level. AB 1595 is set for hearing on April 20, 2010 in the Assembly Health Committee. AB 1887 (Villines) establishes the state temporary high risk pool program in order to be eligible for high risk pool funds under the Affordable Care Act. AB 1887 is set for hearing on April 20, 2010 in the Assembly Health Committee. AB 2345 (De La Torre) requires carriers, after January 1, 2011, to meet the requirements of specified provisions of the federal Public Health Service Act, related to federal health care reform. AB 2345 is set for hearing on April 20, 2010 in the Assembly Health Committee. AB 2244 (Feuer) among other things, prohibits carriers from denying coverage on the basis of an actual or expected health condition effective January 1, 2011 for children and effective January 1, 2014 for adults. AB 2244 is set for hearing on April 20, 2010 in the Assembly Health Committee. AB 2477 (Jones) deletes the provision that requires Mid-Year Status Reports for children from January 1, 2011 to July 1, 2012, therefore establishes continuous eligibility for children in the Medi-Cal Program. AB 2477 is pending in the Assembly Appropriations Committee. SB 900 (Alquist) establishes the California Health Benefits Exchange within the California Health and Human Services Agency and would requires the Exchange to, among other things, AB 1602 Page 10 implement specified functions imposed by the Affordable Care Act. SB 900 is set for hearing in the Senate Health Committee on April 21, 2010. SB 1088 (Price) prohibits, with a specified exceptions, the limiting age for dependent children from being less than 27 years of age. SB 1088 is set for hearing in the Senate Health Committee on April 21, 2010. 5)PREVIOUS LEGISLATION . AB 8 (Nunez) of 2007 and AB 1 X1 (Nunez) of 2007, would have established a comprehensive package of health care reforms, including creating a statewide health care purchasing program (California Health Insurance Purchasing Program, or Cal-CHIPP); modifying rules governing private individual and group health insurance; initiating and expanding health care quality and cost measurement activities; and establishing administrative and funding mechanisms to support the reforms. AB 8 (Nunez) was vetoed by Governor Schwarzenegger and AB 1 X1 failed passage in the Senate Health Committee. 6)SUPPORT . The California Retired Teachers Association, writing in response to a previous version of this bill, writes that this bill will provide clarity and structure for implementing the new federal health care reform legislation. 7)SUPPORT IF AMENDED . The California Chiropractic Association requests and amendment to include chiropractic care as a coverage option. 8)CONCERNS . Health Net, writing in response to a previous version of this bill, states that they will work collaborative with the Legislature and regulators to implement federal health care reform, including the creation of an exchange. Health Net further states that their preliminary review of this bill found that there are some provisions that do not follow the authority as set forth in federal health care reform. The California Association of Health Plans (CAHP), also writing in response to a previous version of this bill, states that this bill includes a number of provisions that point towards an Exchange that is intended to be at its core, a purchaser of services. CAHP states that they are still formulating their opinion on this concept and many other aspects of the bill. AB 1602 Page 11 9)OPPOSITION . Anthem Blue Cross, writing in response to a previous version of this bill, states that this bill will limit consumer choice and set up onerous rate setting requirements. Anthem further states that this bill would not establish an exchange that meets the requirements of the Affordable Care Act while maintaining a functional health insurance market place and ensuring consumer choice. REGISTERED SUPPORT / OPPOSITION : Support California Retired Teachers Association Opposition Anthem Blue Cross Analysis Prepared by : Melanie Moreno / HEALTH / (916) 319-2097